Vocus widens horizons after reverse takeover

Wholesale voice and data provider Vocus Communications expects significant ­local and international growth driven by rising broadband traffic, after ­revealing plans to list on the Australian Securities Exchange following a reverse takeover.

The company is planning an initial public offering on June 22, after being acquired by
First Opportunity Fund Ltd
, an ASX-listed fund managed by Investec Wentworth Private Equity.

FOF will pay $20 million including a cash payment of $6.5 million and the issue of 26.9 million fully paid FOF shares to Vocus shareholders at an issue price of 50¢ per share. The company will seek to raise new capital of $6 million via a share placement and a $1 million IPO ­underwritten by Investec.

Vocus has appointed well-known internet industry figure
David Spence
as its chairman. The former president of OzEmail and managing director of Unwired will begin work at Vocus on the day of listing, after leaving the Seven Group-owned Unwired in early February.

“I left Unwired in early February on pretty good terms with the Seven Group, and I think Vocus represents one of the exciting opportunities in the telco/internet space at the moment," Mr Spence told The Australian Financial Review yesterday.

“I think there will be quite a good investor appetite for the new stock. We have seen how successful stocks like Pipe Networks have been, having just been taken over by TPG, and certainly the ISPs (internet service providers) like TPG and iiNet have done extraordinarily well in the last six months."

FOF, which has minority interests in two Hunter Valley wine companies, will undergo a major restructure. It is seeking shareholder approval to dispose of its residual wine interests, the Monarch Group, saying it would distribute the net proceeds.

Vocus chief executive James Spenceley said the acquisition and public listing would give the company a larger public profile and access to the capital markets needed to fuel its growth. It was recognised by Deloitte last year as the country’s fastest-growing technology company, with 3237 per cent revenue growth in two years.

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“Obviously 3000 per cent revenue growth isn’t sustainable for a particularly long period," he said, “but we continue to see revenue growth month on month. It is not slowing down in any way, just the percentage rate drops as the revenues get higher.

“Internationally we moved into New Zealand 18 months ago, and have now captured 10 to 15 per cent market share, so we will be very interested to see how that would go a second time with the experience behind us."

Investec Wentworth Private Equity executive director Jon Brett said the acquisition came after FOF had assessed opportunities in the telecommunications market for the past two years. “The telecommunications industry, specifically internet, is growing rapidly and we expect this growth to continue as technologies converge in internet, data, voice and video media," Mr Brett said.

“We sought an entry point that would enable FOF to benefit from this growth and the expected industry consolidation."

Mr Spence said developments on the government’s national broadband network were helping to drive the telco sector. He said Vocus was “riding the wave" of growing broadband use, which was boosting traffic at the wholesale level.

“The NBN is doing a good job of assisting the industry to move along at a faster pace than it was in the first part of the decade," he said.